Understanding the Market | PRADA falls over 8% again as the company spends $1.375 billion to fully acquire Versace, which may drag down profit margins in the next two years

Prada fell more than 8% again, as of the time of writing, down 7.24% to HKD 45.45, with a transaction volume of HKD 30.5581 million. In terms of news, Prada recently announced plans to acquire the Italian fashion brand Versace for USD 1.375 billion. According to Capri Group's fiscal year 2024 report, Versace's revenue was USD 1.03 billion, a year-on-year decrease of 6.9%, with a profit margin of only 0.4%. In the third quarter of fiscal year 2025, Versace's sales significantly declined, dragging down Capri Group's third-quarter revenue, which fell 11.6% year-on-year, resulting in a net loss of USD 547 million after accounting for non-cash impairment charges. Macquarie released a research report stating that the acquisition of Versace will dilute Prada's EBIT profit margin for this year and next, gradually recovering from the second half of next year. The firm lowered its net profit forecasts for Prada for this year and next by 6% and 5%, respectively, to account for the impact of the Versace acquisition, reducing its target price by 25% to HKD 66, with a rating of "Outperform." HSBC stated that considering macroeconomic uncertainties and skepticism towards luxury goods, the timing and price of the acquisition proved to be very good in hindsight, while the market's initial reaction has become one of the concerns